OPEC plans to discuss Wednesday a proposal that would cut nearly 1 million barrels a day of the cartel's production over one year, said people involved in the discussions, setting up a showdown between Saudi Arabia and Iran in Algiers.
Earlier Tuesday afternoon, oil prices fell after Iran's oil minister Bijan Zanganeh said he hadn't received any official proposal from Saudi Arabia.
Goldman Sachs, meanwhile, on Tuesday slashed its oil forecast for the rest of 2016 (http://www.marketwatch.com/story/goldman-cuts-q4-wti-oil-forecast-to-43-a-barrel-from-50-2016-09-27), warning that supplies will continue to outstrip demand regardless of what happens in Algiers this week. The drop accelerated as the U.S. dollar climbed against the euro. He said he will meet with his Iranian counterpart to discuss "potential coordination and actions on the market", according to the Tass news agency.
For months, rumors have circulated that producers may freeze or cut production levels in an effort to stimulate oil prices.
Saudi Arabia had offered to reduce its output if Iran agreed to freeze production, a shift in Riyadh's position as the kingdom had previously refused to discuss output cuts. Freezing output was first proposed in February, but a meeting in April ended with no final accord.
November West Texas Intermediate crude fell by $1.27, or 2.8%, to $44.66 a barrel on the New York Mercantile Exchange. Prices have averaged about $US44.80 this quarter.
Brent crude futures slipped 15 cents to $47.20 a barrel as of 0346 GMT after closing up $1.46, or 3.2 percent in the previous session.
November crude oil futures moved up on Monday, after commodities traders began to see a deal in the works over oil production limits this week. Oil market is trending in right direction and oil fundamentals will require higher prices in the long term, Saudi Oil Minister Khalid Al-Falih tells reporters in Algiers. The cut would remove about half of Saudi Arabia's 1 million barrels per day increase since 2014.
Saudi Energy Minister Khalid al-Falih told reporters in the Algerian capital, where OPEC and other oil producers gathered for the September 26-28 International Energy Forum, he did not expect an agreement to come out of the consultations on the last day of the meet.
"The market is acutely focused on the headlines from Algiers", said Adam Wise, who helps run a $US7 billion oil and natural gas bond and private equity portfolio at John Hancock in Boston. "Prices are down today because people don't think there will be a consensus reached at the meeting".
"It's not our agenda to reach agreement in these two days", Zanganeh said. Iran, which pumped about 3.6 million barrels a day last month, is seeking a 12 to 13 per cent share of OPEC's market, he added. A cap using that month as a reference point would mean a reduction of 900,000 barrels a day, according to OPEC data. "If you look at the production levels of the leading oil producers except for the States, these all are very high, close to all-time highs, which shows that the petro nations - they're just in need of revenues".